EPA’s Powers Upheld by Court With Climate Rules on Deck

Photographer: Luke Sharrett/Bloomberg

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Photographer: Luke Sharrett/Bloomberg

The U.S. Supreme Court yesterday strengthened the Environmental Protection Agency in its drive to cut air pollution, a result critics warned would lead to costly regulations as the agency moves to curb global warming.

The justices, voting 6-2 to overturn a lower court, backed the EPA’s so-called Good Neighbor rule, which targets air pollution that crosses state lines.

While the practical impact of the decision may be limited - - other rules have already forced most utilities to install pollution scrubbers -- the decision effectively gives the EPA wide deference in crafting regulations. That’s a result praised by environmentalists and greeted with fear by dissenting justices and industry groups.

“Today’s opinion is a textbook example of how a court established to ensure government by the people can instead assure government by the bureaucracy,” Justice Antonin Scalia, who wrote the dissenting opinion, said from the bench yesterday.

Coal-fired power plants, a top source of mercury and acid gases as well as the chemicals blamed for everything from acid rain to climate change, face a series of EPA rules under the administration of President Barack Obama aimed at getting them to clean up. American Electric Power Co., Southern Co. and coal producers such as Peabody Energy Corp. are now bracing for rules to curb greenhouse-gas emissions from existing power plants set to be issued in June.

Coal Impact

“The EPA’s win could encourage the agency to push for a stronger rule rather than a weaker one on the basis that the Supreme Court has validated its interpretation” of the Clean Air Act, Kevin Book, an analyst at ClearView Energy Partners LLC said in a research note yesterday.

It’s just that prospect that has coal companies worried.

“EPA’s forthcoming carbon rule on existing generating units promises to be the most flagrant and costly abuse of the Clean Air Act to date,” Laura Sheehan, a spokeswoman for the American Coalition for Clean Coal Electricity, said in a statement yesterday.

The cases decided yesterday concerned sulfur dioxide and nitrogen oxide that blow across state lines, causing smog or acid rain in neighboring states.

The EPA established a modified cap-and-trade system to limit emissions of sulfur dioxide and nitrogen oxide in 28 states, all in the eastern two-thirds of the U.S., where the pollutants blow into neighboring jurisdictions pushing their air above legally established health limits.

Intrusive Approach

Utilities and coal producers had argued that the EPA’s approach was too intrusive and didn’t give states an initial shot to clean up on their own.

The Obama administration estimated that the measure will prevent as many as 34,000 premature deaths a year. The EPA’s rule was challenged by 14 states, led by Texas, with support from companies such as Entergy Corp., Peabody and Southern.

Separately, the U.S. Court of Appeals on April 15 upheld another EPA regulation on mercury emissions from power plants. Complying with the mercury rule, or MATS, requires much of the same equipment as the cross-state rule, and with that deadline looming as soon as next year, companies have already moved to install scrubbers or shutter dirty plants.

“With the retirement and retrofit plan we currently have in place to comply with MATS and other rules,” required cuts “are close to being achieved,” Melissa McHenry, a spokeswoman for AEP, said in an e-mail.

‘Valid Argument’

Even so, yesterday’s “ruling is disappointing, and we believe that the dissenting opinion raises some valid arguments,” she said, referring to Scalia’s criticisms.

The high court did leave open the ability of states to individually challenge whether they should still be part of the program. That could allow Texas to petition to try to get out of the program, analysts say.

“Any state can come back and challenge the rule as it applies to them,” said Jeff Holmstead, a former EPA official and lawyer at Bracewell & Giuliani in Washington. “I think that solves the problems for Texas, which is the poster child for over-regulation.”

The rule targets sulfur dioxide, which can lead to acid rain and soot, and nitrogen oxide, a component of ground-level ozone. Coal accounts for 98 percent of sulfur dioxide and 92 percent of nitrogen oxide released into the air by power plants, according to the EPA.

Ozone Case

Also yesterday, a federal judge told the EPA to develop a proposal setting nationwide ozone standards by December, and a final rule next year, according to Paul Cort, an attorney for Earthjustice, which is representing the Sierra Club and other environmental groups pressing for the new rule.

Under pressure from refiners, manufacturers and paper makers, Obama yanked an EPA proposal on ozone before his re-election, and pledged to come out with a new rule soon. It hasn’t, and the EPA failed to convince U.S. District Judge Yvonne Gonzalez Rogers in San Francisco that it couldn’t meet the deadlines sought by environmentalists, Cort said. The decision, delivered orally, couldn’t be immediately confirmed in court records.

The cases decided yesterday are U.S. Environmental Protection Agency v. EME Homer City Generation, 12-1182, and American Lung Association v. EME Homer City, 12-1183.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Patrick Oster at poster@bloomberg.net Steve Geimann, Mark McQuillan

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